Press Release No. 99/7

The International Monetary Fund (IMF) has approved a request by the Government of the Kyrgyz Republic to augment by SDR 8.88 million (about US$12 million) the IMF’s financial support under the current three-year Enhanced Structural Adjustment Facility (ESAF),¹ approved by the Executive Board on June 26, 1998, in the amount of SDR 64.5 million (about US$88 million). See (Press Release No. 98/27. The augmentation, which is intended to help counter the impact of the Russian financial crisis on the Kyrgyz economy, will be available as part of the second loan under the first annual ESAF arrangement. The Executive Board made the decision in conjunction with the completion of the mid-term review of the first year of the ESAF.

Background

The program supported by the ESAF was designed to consolidate the gains in macroeconomic stabilization and structural adjustment achieved under Kyrgyz Republic’s first three-year ESAF-supported program, and to address the remaining deficiencies in creating a sustainable environment for continued growth based on a dynamic private sector. While implementation of the current program was broadly satisfactory during the first few months, the suddenness and magnitude of the external shock caused by the onset of the Russian crisis confronted the Kyrgyz authorities with the challenge of responding quickly and appropriately to the new external environment. The authorities have acted decisively to strengthen the program through significant tightening of financial policies and a reemphasis on the program’s structural component.

The Kyrgyz Republic joined the IMF on May 8, 1992. Its quota is SDR 88.8 million (about US$121 million). Its outstanding financial obligations to the IMF currently total the equivalent of SDR 124 million (about US$170 million).

Kyrgyz Republic: Economic Indicators 1995 1996 1997 1998 1999 Est. Proj. (Percentage change) Real GDP -5 7 10 2 3 Consumer prices1 32 35 15 18 8 Producer prices1 26 41 15 18 8 Broad money 77 23 25 17 11 (In percent of GDP) Agriculture 41 46 41 40 41 Industry 12 11 16 17 17 Construction 6 6 5 2 2 Transport and communication 2 5 4 4 2 Other 39 32 34 37 38 Government revenue and grants 17 16 16 18 20 Government expenditures 33 25 25 28 27 Overall balance -17 -10 -9 -9 -8 Exports 27 29 36 32 46 Imports 39 43 37 41 50 Current account balance -16 -23 -8 -17 -12 GDP (In millions of soms) 16,145 23,400 30,686 35,832 40,188 Sources: Kyrgyz authorities; and IMF staff estimates. 1December to December. 1 The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5 ½-year grace period.